Secured loans can help you borrow with what you own.
Use something you own to back the loan, which may help you qualify or get better terms.
When a secured loan may make sense
Putting up savings, a vehicle, or your home may help you qualify for a lower rate or better loan terms. Before you borrow, make sure the payment fits your budget and understand what could happen to the asset if you don’t repay.
Types of secured loans
Each type uses something you own. How you get the money and repay it can differ.
| Loan type | Asset pledged | Why someone might use it |
|---|---|---|
| Savings-backed loan | Money in a savings account | Borrow while keeping money in a savings account. |
| CD-backed loan | A certificate of deposit | Borrow against a CD without cashing it out early. |
| Vehicle-secured installment loan | An eligible vehicle | Use a vehicle you own to help qualify for a loan. |
| Home equity loan | Your home | Get one lump sum for a large expense or debt payoff. |
| HELOC | Your home | Draw money from your home equity as you need it. |
| Cash-out refinance | Your home | Replace your mortgage and take out some of your home equity in cash. |
Secured Loans Snapshot
Use something you own to back the money you borrow.
How secured loans work
- 1Choose an asset
- The lender checks the asset and decides whether to accept it as collateral.
- Its value may affect how much you can borrow.
- 2Receive the loan
- If approved, you receive the funds.
- The lender holds a claim on the pledged asset, or may restrict access to pledged savings, while the loan is outstanding.
- 3Make payments
- You repay the amount borrowed plus interest under the loan agreement.
- If you do not repay as agreed, the lender may be able to take the collateral.
- 4Pay off the loan
- Once you pay it off, the lender removes its claim on the asset.
Common questions about secured loans
What is a secured loan?+
A secured loan lets you borrow using something you own to back the loan. That could be savings, a vehicle, or your home. The lender has a claim on that asset until you repay the loan.
How is a secured loan different from an unsecured loan?+
An unsecured loan does not require you to use something you own to back it. A secured loan does. That may help you get a lower rate, but the rate depends on your credit, the lender, and the loan terms.
Can I get a secured loan with bad credit?+
You may have more options if you can use an asset the lender accepts. Approval is not guaranteed. The lender will also review your ability to make the payments.
What can I use to back a secured loan?+
It depends on the loan. Some use money in a savings account or CD. Others use a vehicle or your home. Check which assets the lender accepts and whether you can still use the asset while you repay.
What happens if I cannot repay a secured loan?+
Contact the lender as soon as you think you may miss a payment. Depending on the loan and its terms, the lender may take money held for the loan, repossess a vehicle, or start foreclosure on a home.
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